Throughout the whole affair involving Te Kohanga Reo National Trust there have been a few things said about what TKRNT should and should not do that seemed to me to be a bit strange in relation to trust law for TKRNT is a very specific type of organisation; it is a trust governed by trust law.
A few examples. The collective of kohanga reo whanau from Mataatua and Tauranga-Moana held that the dismissal of Titoki Black as CEO of TKRNT was not done in accordance with tikanga and that was why they were aggrieved. Minister of Education Hekia Parata was reported in the NZ Herald saying the trust “was not democratic enough”. Hone Harawira was reported saying that the board should comprise two representatives, one male and one female, from each of the ten kohanga reo regions.
Each of those raises an issue in trust law, namely tikanga and trust law, democracy and trust law, and representation and trust law.
In this post I will look at trust law in some detail, at the tension between trust law and Tikanga Maori, and at the end examine the issue of Te Kohanga Reo National Trust, democracy and representation.
I’m not an expert in trust law but I have been a trustee and managed trusts for over four decades. In that time I have consulted with and been advised by several specialist trust lawyers and in the end bought and read the legal texts for myself. In my experience, with both Maori and non-Maori trusts, I have found that few trustees understand trust law and that many are ignorant of their legal powers (and the restrictions on those powers), their obligations, duties, responsibilities and liabilities. Given that there are thousands of trusts operating throughout Te Ao Maori the lack of knowledge of trust law is a major deficiency in the governance of the affairs of Maori.
I have often been dismayed by the appointment of trustees who had little or no understanding of their legal powers, obligations, duties, responsibilities and liabilities. And even more dismayed if and when they have shown no inclination whatsoever to acquaint themselves with trust law, or even to acknowledge that it exists.
And in some cases I have been appalled to witness the appointment of people wholly unsuited to the position of trustee. I have also known proven thieves to be appointed (even as treasurer) and when they have embezzled funds been exasperated that nothing was done about it.
The Attributes of a Trustee
In my opinion there are three important attributes of a trustee; namely integrity, competence and maturity. By maturity I do not mean age but experience and wisdom.
Integrity speaks for itself. Competence includes an understanding of trust law as well as understanding investment, financial governance and financial management among other things. In the case of TKRNT there is also a requirement for competence in Te Reo Maori because the Trust’s purpose is entirely about Te Reo. I have found that a modicum of wisdom is always important, the wisdom of maturity and experience. The appointment of trustees having regard for these attributes is a serious matter that should not be taken lightly yet too often trustees are appointed according to other criteria without any consideration of those three attributes.
In recent public discourse about Te Kohanga Reo National Trust there was much crticism of trustees being appointed for life and an assumption that elderly trustees might be too out of touch. Age however does not preclude the attributes of integrity, competence and maturity and should be no barrier to trusteeship provided that provision is made for smooth transitions of trusteeship in the event of the incapacity or demise of elderly trustees.
E hoa ma, as an elderly trustee myself I would think like that wouldn’t I.
There are estimated to be between 300,000 and 500,000 trusts in New Zealand and I would think that a surprisingly large number of those have trustees appointed for life.
Tikanga Equity – The Origins of Trust Law
Trust law is its own tikanga, a tikanga rooted in roughly 700 years of the development of an aspect of English law called Equity. Equity is that body of law developed by the English Court of Chancery before 1873 and it is a set of legal doctrines that reflect general notions of good conscience and fairness. A trust is one form of Equity in which the trustees have a legal interest in the trust and the beneficiaries have an equitable interest. That is that the trustees are the legal owners of the assets in trust but only insofar as those assets may only be used for the purposes of the trust and for the benefit of the “beneficiaries” and not for their own benefit.
Trusteeship over assets that benefit other people and not yourself requires a high level of integrity and over the centuries the law has developed doctrines or tikanga to codify that requirement.
I have read that this tikanga developed from the time of the Crusades when knights would leave their lands and families for years of crusading in the Holy Land from which they might never return. It developed to protect the lands and other property of the knights “in trust” for the benefit of their families or “beneficiaries” against the predation and dishonesty of some people who would take advantage of the absence or death of a crusader to acquire his lands for themselves. That is a much simplified explanation but it does convey the essence of trust law.
It is important to understand this simple concept and to understand that trust law is its own tikanga.
Common Law was developed in the English common law courts over many centuries. Equity was developed in the English Court of Chancery. They are two separate tikanga both part of the concept and codification of the law we all now live by in Aotearoa New Zealand.
Common law now forms the basis of much New Zealand statutory or parliament-made law but there is still a body of common law that has not been transformed into statutory law and common law is still relevant in the courts. Much of the tikanga of Equity has also been transformed into statutory law primarily in the Trustee Act 1956 and also in the case of Maori lands in Te Ture Whenua Maori Act 1993. However the tikanga of Equity still prevails and all statutory trust law is interpreted according to that tikanga and in consideration of case law. Case law is that law developed in the courts based on interpretation of Tikanga Equity. Case law sets precedents that influence future decisions in the courts.
Where the relevant statutory legislation is silent Tikanga Equity and case law prevail. The Rules of Equity are to be found in case law and in numerous authoritative legal texts which also explain that case law.
This may appear complicated and convoluted but an understanding of statutory trust law is not enough. To be competent a trustee must also understand Tikanga Equity. I will try to explain Tikanga Equity as simply as I can.
Powers of Trustees
The powers of trustees are established in Tikanga Equity and in statutory law. In Tikanga Equity “equitable relationships” are created. We must remember that equity is about good conscience and fairness. These equitable relationships include:
- Fiduciary relationships;
- Relationships of confidence; and
- Relationships of influence.
A trust, established as a creature of Tikanga Equity is a fiduciary relationship subject to fiduciary rules and principles, or obligations. At the core of those obligations a trustee must:
- Avoid personal profit or benefit;
- Avoid conflict of interest; and
- Avoid divided loyalties (the loyalty is to the trust and not to any external persons or organisations).
The avoidance of conflicts of interest is of particular relevance in Maori trusts and is a rule often breached. I think the main reason is that a conflict of interest in Tikanga Equity is generally not considered a conflict of interest in Tikanga Maori. In a later section I will discuss the relationship of Tikanga Maori to Tikanga Equity. A trustee must also:
- Act in good faith;
- Use his or her powers for their proper purpose; and
- Exercise care (i.e. a duty of care). The duty of care requires a trustee to administer a trust in good faith, exercising its powers as a prudent person would with “reasonable care, skill and caution”. There is a whole body of law around this duty alone, including definitions and descriptions of a prudent person. In managing trusts I have sometimes needed to consult a trust lawyer to seek an expert opinion on whether a contemplated course of action would be prudent or not. It may seem a simple matter of judgement but it is not always so.
Other aspects of the law of fiduciary obligation under Tikanga Equity include:
- Duty of loyalty;
- Duty of impartiality;
- Duty to act personally;
- Duty to keep full and accurate accounts; and
- Duty to preserve trust property.
Duties of Trustees
The first duty of a trustee is to be fully acquainted with the terms of the trust as specified in the trust instrument or instruments, such as deeds of trusts and constitutions. The trust instrument is paramount.
The second duty is to adhere totally to the trust’s terms regardless of any other considerations (including Tikanga Maori if Tikanga Maori is in conflict with Tikanga Equity). The trustee’s only duty and loyalty is to the trust and to the terms of the trust, and therefore to its beneficiaries.
In this sense the trustee represents only the trust, and not any other person or organisation even if the terms of the trust provide for the appointment of that trustee by an external person or organisation. A trustee acts alone in the service of the trust. A trustee is not a representative and a trust is not a democratic institution. It is a legal and equitable institution.
In relation to the beneficiaries trustees must:
- Act in the beneficiaries’ best interests;
- Maintain impartiality between beneficiaries;
- Pay the correct beneficiaries (if they are to be paid under the terms of the trust).
The trustees themselves must:
- Not profit from trusteeship;
- Act gratuitously (i.e. without payment of sitting fees or other fees, wages or salaries unless payment is specifically authorised by the terms of the trust, but they may be paid actual and reasonable expenses such as for travel and accommodation);
- Not delegate their obligations, duties and responsibilities;
- Be active in their trusteeship;
- Act unanimously (unless the terms of the trust allow for voting and for majority decision making). Additionally a trustee, including a chairperson of a board of trustees, may not act alone for decisions may only be made by all trustees acting together unless the trustees have specifically authorised one of their number to act alone on a specific matter; and
- Keep proper accounts and provide that information to those entitled to receive it.
Investment of trust assets is a huge and complex area of trust law. Every trustee of a trust that is required to invest assets must be or become knowlegable about investment. Similarly every trustee must be financially literate in order to perform his or her duties to a high standard. A lack of knowledge of trust law and a lack of financial literacy are the two major deficiencies in trusteeship that I have witnessed in my 40+ years of trusteeship.
These deficiencies often lead to breaches of trust.
Breach of Trust and the Removal of Trustees
Any trustee who breaches the terms of the trust, or the obligations of a trustee, or exceeds the powers of the trustee may be held in breach of trust by the courts and dismissed. A breach of trust is therefore any act which is in violation of the duties of a trustee or of the terms of a trust, or any act or omission on the part of a trustee which is inconsistent with the terms of the triust agreement or the law of trusts.
Such a breach need not be intentional or with malice, but can be due to negligence alone.
Additionally under Section 229 of the Crimes Act 1961 every one is guilty of a criminal breach of trust who, as a trustee of any trust, dishonestly and contrary to the terms of that trust, converts anything to any use not authorised by the trust. Anyone so doing is liable to imprisonment for a term not exceeding seven years.
I have seen instances of this in cases where trustees have given favourable consideration when disposing of some assets of a trust by selling them at a discount to themselves or to their own whanau or to another organisation in which they are involved. The duty of the trustee is to sell at the most favourable price and to do otherwise is an act of criminality.
Trusteeship is therefore a position requiring high levels of integrity and competence, and the wisdom and maturity to fulfil those requirements.
The law provides for the removal of trustees through breach of trust. Trustees may also be removed if they become physically or mentally incapacitated, or if a trustee is convicted of dishonest or criminal behaviour. That last reason was perhaps part of the intent of the leaking of financial information to Maori TV.
The law does not provide for the removal of trustees by government ministers, as a few people have advocated in the case of TKRNT.
The Burden of Trusteeship
Trusteeship is not to be taken lightly for it is an onerous responsibility and trustees are individually liable for any breach of trust or imprudent decision making by the trust.
It requires an even higher standard of prudence than one might exercise over one’s own affairs and trustees are held personally accountable to the higher standard. Most trustees do not understand that personal liability.
As I have come to understand trusteeship in greater depth over the years I have become more wary of accepting trusteeship. I now consider the integrity, competence and maturity of those who will be my fellow trustees and also those who may be employed by the trust as managers, for in accepting appointment one is to some extent placing one’s reputation in the hands and integrity of others.
Too often trustees are appointed and trusteeships acccepted as just another committee membership without any understanding of the obligations, duties, responsibilities and liabilities of trusteeship. In the present discussion and consultation over the structure of TKRNT I am sure that few who aspire to be trustees really understand all of that.
Tikanga Maori vs Tikanga Equity
I mentioned earlier that conflicts of interest often arise because of differences between the two tikanga. In my experience the tension between Tikanga Maori and Tikanga Eqjuity has been the cause of much misunderstanding about the powers, obligations, duties, responsibilities and liabilities of trustees.
In Maori trusts it is of course appropriate that trustees conduct themselves and their business in accordance with Tikanga Maori. However, and it is a big and often painful however, without exception and unless provided for in the trust’s terms, Tikanga Equity has precedence over Tikanga Maori in all mattters of trusteeship.
A trust is a creation in Tikanga Equity, not a creation in Tikanga Maori. And although trusteeship is defined as kaitiakitanga in its translation from one to the other the two are not always the same thing and in the case of legal and equitable trust they are not the same thing.
Koha is a case in point and an issue of common misunderstanding. Trustees will often feel obliged to give koha from the funds of the trust but unless the trust’s terms specifically authorise koha in specific instances, or in the promotion of the purpose of a purpose trust (see later), it is not lawful. From my personal experience I have known of trustees who give koha from trust funds at tangihanga of persons not directly involved in the trust, in the mistaken belief that they are representing the trust. I have always assumed that I represent only myself in those circumstances and have given koha from my own pocket. In Tikanga Equity it is the safest option.
In Tikanga Maori matters are often but not always decided in hui and by consensus of those with an interest in the matter. Many people assume that consensus decision making by those with an interest applies to trusts as well. It does not for trustees are required to act personally and only in the interests of the trust as stated in the trust’s terms, and not in anyone else’s interests. And trustees have the sole power to make those decisions.
This is a matter that causes much confused thinking in relation to Te Kohanga Reo National Trust for at least half of Te Ao Maori has an interest in the Kohanga Reo Movement. But the lead organisation in the Movement is a trust in Tikanga Equity.
That is the cross we bear if we are to establish ourselves in legal entities in order to receive public funding or to operate in the regulatory environment established by New Zealand law. The legal entities whether trusts, incorporated societies or limited liability companies are all established, defined and governed in the other tikanga. Even Maori Land Incorporations are established, defined and governed in the other tikanga.
Types of Trust
There are various types of trust such as family trusts and pension trusts, and the putea trusts, whanau trusts, ahuwhenua trusts, whenua topu trusts and kaitiaki trusts that are established through the Maori Land Court. Trusts that do not have specific or named beneficiaries are called purpose trusts and are often charitable trusts with either narrow or broadly defined purposes.
Purpose of Te Kohanga Reo National Triust
Te Kohanga Reo National Trust is a charitable trust. It does not have specific or named beneficiaries but does have a very clear purpose. It was incorporated in 1983 under the Charitable Trusts Act 1957. The Trust’s Deed sets out its objectives which are to promote, support and encourage:
- The use and retention of Te Reo.
- The Kaupapa of Te Kōhanga Reo, and in particular the goal of total immersion in Te Reo Māori.
- The establishment and maintenance within New Zealand of Te Kōhanga Reo.
- The provision of financial, advisory, and administrative assistance and support for the whānau of Te Kōhanga Reo.
Despite what many people may think about the role of TKRNT, or what the role should be, that is its purpose. And as readers will know by now that purpose as stated in the trust deed is paramount.
As laws change and as society and circumstances change there may be a need to update trust deeds. The method of changing a deed may be specified in the deed and in some cases it may require application to the High Court (or Maori Land Court), and even the assent of the Attorney General. Unless ordered by the court amendments to trust deeds are the responsibilty of its trustees.
Structure of the Trust Board
The number of trustees and their method and term of appointment are matters specified in the trust deed. A change in structure will require amendments to the deed.
At the national hui held at Turangawaewae in April four proposals for the structure of the Trust were put forward and the working party is presently seeking feedback about those proposals. Before the national hui Hone Harawira called for the resignation and replacement of the TKRNT trustees, to be replaced by a younger generation, and on 13 June he was reported calling for a board of 20 trustees, one female and one male from each of the ten kohanga reo regions.
For a start I think 20 trustees would be way over the top and would turn the trust into more of a parliamentary and political caucus than a trust established in Equity.
I said caucus not circus!
Then I think that the criteria of integrity, competence and maturity should be paramount regardless of region and the very best should be sought from whatever region.
At the moment according to the TKRNT website there are nine trustees and I personally think that is too many and that seven who meet the criteria of integrity, competence and maturity would be about right. Decisions such as this should be made in the best interests of the trust and the workings of the trust, not in the interests of representation which is not a concept in trust law.
However in deference to calls for greater input from kohanga whanau to the decision making of the trustees I would employ the mechanism of advisory trustees. Advisory trustees are provided for in the Trustee Act 1956 and are widely used by the Maori Trustee in the management of Maori lands. Advisory Trustees are not decision makers but are present and can participate in deliberations. The decision making power rests with the Responsible Trustees.
Ten advisory trustees could be appointed, one from each region, against the criteria of integrity, competence and maturity. They would also serve as a pool of potential Responsible Trustees where they would become acquainted with the Trust and be evaluated for suitability for appointment as Responsible Trustees in their turn.
That may be one of the proposals put to the national hui. I wasn’t there.
Whatever course the Trust decides upon I would employ the very best trust lawyer I could find, whether Maori or Pakeha. I would think the best place to look would be in the big legal partnerships. This is a tricky time for the Trust caught between disaffected and crusading whanau, the media, opinionated commentators, and the Minister and Ministry of Education. I have found that the best trust lawyers are worth their weight in gold in finding ways through such demanding situations.
And in the end trust law is all there is in defining the governance of trusts in Tikanga Equity. We need to abide by it and we need to be good at it.
Democracy and Te Kohanga Reo National Trust
I have already observed that there is nothing democratic about trust law. So moving on from trust law let’s look at democracy.
The Kohanga Reo Movement is not a democracy and never has been. The Kohanga Reo Movement is a kaupapa.
Within that kaupapa each kohanga is locally focused on its own mokopuna and is managed by the whanau within the funding provided by Ministry of Education through Te Kohanga Reo National Trust. With that funding comes the obligations and regulations that accompany all government funding. As providers for pre-school aged children each kohanga is also required to abide by a strict regulatory framework designed to ensure the care, health and safety of mokopuna.
There is not much room for deviation and nothing democratic about the funding, care, health and safety regime imposed by government. And just like the government the Trust imposes its own regulatory regime.
What is this talk about democracy and about representation?
If the Minister for Education and others insist on the Movement becoming more democratic the question needs to be asked whether the network of early childhood centres answering directly to the Ministry will be made more democratic as well. As the primary provider to that network will the Ministry itself become a more democratic organisation? I think not.
And if the Kohanga Reo Movement were to come under the direct jurisdiction of the Ministry would the Ministry make it more democratic? I think not. I think it would be less democratic.
So what is this talk about democracy and about representation?
If you look at schools and early childhood centres in the Ministry network they are all self governing and managing within the legislation and regulatory framework and within their allocated budgets but they have no say whatsoever in anything that happens beyond their own boundary fence. If you look at kohanga reo they are all self governing and managing within the legislation and regulatory framework and within their allocated budgets and they don’t have much say in what happens beyond their boundary fence.
In both cases what is important to them happens almost entirely inside the boundary fence and not in Wellington. The difference between them is that one is a mandatory government curriculum and the other is a kaupapa not designed, developed and dictated by government. The Kohanga Reo Movement is a kaupapa, and one that the Trust has fiercely defended and protected for 32 years.
So now some in the Movement and some outside the Movement think it should now be about democracy and representation. In whose interest would that be? In the interest of the kaupapa? In the interest of Te Reo? In the interests of the mokopuna? In the interests of the whanau? Whose interests?
I’m looking for the rationale here. Is this talk of democracy and representation about the kaupapa or is it about something else?
I think it would be a good thing for the Movement to move into a new phase in its evolution and to make provision for more formal input into Trust decision making and more transparency of that decision making. But we don’t need to tear the Trust apart to achieve that. Nor do we need to open trusteeship up to elections or something similar. There are other ways to achieve that.
In my time with the Movement I remember Dame Te Atairangikaahu and Dame Iritana being constantly on the move throughout the Movement meeting, talking and listening to the whanau, letting them know what was happening and listening to their concerns, coming back to Wellington and lighting fires under the staff to fix things that needed fixing. Well, it was just Iritana who lit the fires. And it was Iritana who did most of the talking and the Lady who did most of the listening. It was a great double act. That’s how it was achieved then. I was with them occasionally.
How times have changed.
The author is not an expert in trust law but has picked up a bit of knowledge here and there. This article is intended as a guide to trust law as it affects Te Kohanga Reo National Trust (and all trusts) as well as further commentary on the continuing debate about the Trust.
I notice that Dame Iritana Tawhiwhirangi and Maori TV CEO Paora Maxwell have just (18 June) “Friended” each other on Facebook. Now isn’t THAT interesting.
Postscript 20th June 2014
Maori TVs Native Affairs team has won two international awards from the World Indigenous Television Broadcasters Network for their investigative journalism, one of them for the programme “Feathering the Nest” about Te Kohanga Reo National Trust and Te Pataka Ohanga Ltd. See “Anatomy of a Scandal” below for the alternative story to “Feathering the Nest”.
The Origins of Corporate Iwi
TKRNT and Credit Card Usage at Te Pataka Ohanga Ltd
Anatomy of a Scandal- Te Kohanga Reo National Trust
Minister Parata Interview